How Inventory Management Software Helps Cut Food Cost

Food cost is one of restaurant owners’ biggest issues, and then you have rising labor costs, so you have no cushion, no room for error. The only way you can truly make a change is to lower your cost of goods sold. Software is a great way to help with that. Watch this video, or continue scrolling, to learn one big way inventory software can help lower food cost.

I understand software. In my previous business, I built a comprehensive software program for independent restaurant operator. I never meant to become an expert of restaurant software, but I did. As a result, I know exactly why and how it benefits you and your restaurant. For the purposes of this tip, I don't care whose software you're using. I care if you're not using software.

If you truly want to attack your food cost, you have to have software today. Since selling my software company, I'm now basing my coaching on spreadsheets because not everybody is ready for software. Plus it’s just super easy to teach the basics on spreadsheets. But when you are ready to take true control of your restaurant business, graduate yourself to software.

The number one reason inventory management software is great for your restaurant business is it gives you accurate inventories. It makes it easy for FIFO pricing – first in first out – product pricing because when you take your digital invoice from your distributor you can upload it into your software when the invoice comes in. This updates every recipe card, so that every batch recipe or any ingredient or component of any dish sitting on the shelf is set at the right price every time. That means every case, every bag, every each on the shelf is the right price. This results in accurate inventories.

The other benefit to inventory management software is it helps you with shelf-to-sheet inventory. That's where you set up the shelves in the order you want it counted. That way the person taking inventory no longer has to search endlessly and inefficiently for each item, making sure they’re not counting ounces when there’s a case there.

You want your kitchen people to be able to say, “Hey, that's a case 30-pound case and that's the 30-pound case price. And over here in this location it's a five-pound bag and over here it's a five-ounce portion bag.”

Then you have accurate fast inventories with software

Next benefit to restaurant management software is automatic par levels. What do I mean? Well, in my coaching, I use a spreadsheet that does this very easily, but software can go one step further. If you give me your beginning inventory and your ending, and all the purchases in between, based on your sales, I can tell you exactly how much product you're going to use going into a $40,000 weekend because it's the arithmetic software gives you. In spreadsheets, you’re missing the inventories, it's only about purchases. Spreadsheets will always be slightly off, but if you want to be dead on, software is magic. Which means if you have to get rid of a chef or a kitchen manager or a bar manager, for whatever reason, or they move on for good reasons, this information, your ordering information, is no longer in somebody’s head. It's in software.

Now, where I find the biggest advantage to using inventory software to reduce your food cost is ideal versus actual product, whether it's food cost or product usage.

Well, number one, you want to know ideal food cost, which is what you should have used if there was no waste, no theft, no spoilage. What would your food cost be if you ran a perfect restaurant (which is not possible)? 

Your actual use is based off beginning inventory plus purchases minus ending to give you use, or what left the shelves. 

Now you can compare those two: if you followed every single recipe card exactly the right way, you should use X amount of product, but the software says you used X based on what actually left the shelves via sales, waste, stolen or spoiled. When there is a discrepancy, you can home in on a problem. That's where it truly takes off.

Here’s how: when you know the product beginning inventory, the product purchases, the product ending inventory, you know exactly how much product left the shelves. Then because you have accurate up-to-date recipe costing cards, if the software shows you used five cases of French fries and you only should have used three, your kitchen manager a chef is now a genius because they literally highlight a print out and go fix that problem.

With software you can start doing inventories in under an hour, as long as it’s set up properly. That means when you see a problem in your kitchen, you can make a change. This has a huge impact on your food cost – in the best way.

I cover systems like this and more in my book? Order your copy of  Restaurant Prosperity Formula: What Successful Restaurateurs Do here. 

If you would like to learn more about the importance of systems and how to run a restaurant, read our free special report, Is Your Food Distributor Screwing You? 5 Things You Can Do Now to Lower Food Cost. Download it here. Be sure to visit my YouTube channel for more helpful restaurant management video tips.